Are there any loans available if you don't have 2 years on the job?

by Sylvia
(Corydon, Indiana)

I do not have 2 consecutive years of work. I just turned 50 and would like to take advantage of the $8000 credit. I have never owned a home. I work in the computer field as a Desktop Support Analyst, earning $18 to $22 an hour.

I've been doing contract jobs for the last 6 years, meaning when one assignment ends I move on to another. I've supported myself for the last 20 years. I've always paid the rent. My last job ended June 2008. I've been on unemployment since then.

I haven't found another job yet...I've never seen the job market like this. I'm in Kenosha, WI and planning on relocating to Louisville, KY where there are jobs...and homes cost a lot less. I can get a decent home for $70-80k.

A mortgage person told me I could get a loan if I worked for 60-90 days and had a relative cosign. My relatives are in Germany. I'm first generation born here. Are there any other options?

Is there any loan out there that I might be able to qualify for?

If it's not possible for me to get the $8000 credit then I need to refocus and study for more certifications so I can increase my income.

Thanks,

Sylvia

===ANSWERS===

Hi Silvia,

Thank you for having enough confidence in me to ask these important questions.

First I want to congratulate you on being able to work for yourself for the past 20 years. I’m a real believer in self-employment.

I do not know for sure, but if your income is reported on a 1099 rather than a W-2 then you are considered to be self-employed by a lender. If your income is reported on the W-2 with taxes being taken out for you, then you’re an employee and working for a company. But if you are receiving unemployment, well once again, either you paid it on your own or a company did.

So, let’s assume you’re self employed. (If this is not the case, the information still applies) As a self employed person we can only show our income by providing copies of the last 2 years tax returns. Now this can become an issue if your tax preparer has done their job. What I mean is most self employed people pay very little taxes since their adjusted gross income is reduced by deductions you may take in your business.

So when we report our income it normally looks lower because of the legal tax deductions. The lenders can look at these returns and take all of this into consideration.

Now to the bad news. If you have not had income since June 2008 and been collecting unemployment, well this presents a problem. The lenders want to see steady income, even if you’re a contract employee for the last 2 years.

Unemployment is not considered ordinary income. It usually is only good for a certain period of time, even though people have been able to collect it for almost 1 year.

Even if you move and get a new job, the gap in your work hurts you. Lenders do not like to see more than a 2 month gap in employment. You appear to be approaching 2 years without employment or business. So a lender will wonder exactly how you derive income and will not consider it unless you can document it.

At one time you could do a non-income verification loan if you had acceptable credit scores. These kind of loans have dried up.

So my best advice to you is to move where you can get work, get yourself established on a job or steady business income and wait it out. Rent for now and once you get that 2 year history of steady employment, then begin to look for a house.

Besides, with the lenders these days, I’m not so sure they would accept a co-signer from a foreign country. I never dealt with an issue like that one before so I cannot say it’s impossible.

Silvia, I know you wanted to get in on the tax credit, but I cannot see how this is possible for you at this time.

I hope you find this helpful.

Best Regards,

Jeff Ragan